top of page

What the inflation slow down means for buyers



If you haven’t heard by now, inflation is at its lowest rate in two years. The consumer price index (CPI) increased just 1 percent in May and 4 percent from a year ago, which is the lowest level since March 2021. The Labor Department suggested that this deceleration is likely to take pressure off the Fed to continue raising interest rates. This, in turn, will increase the likelihood of mortgage rates eventually decreasing.

According to Brown Harris Stevens Chief Economist, Greg Heym, “wages are now rising faster than prices, and the money supply has fallen about 4 percent this year”, which impacts consumer prices. He adds that “inflation continues to come down after 10 rate hikes but remains above the Fed’s 2 percent target.” He also stated that the Fed, in their economic projections, expects two more rate hikes his year.

It has also been suggested that as rent growth continues to cool, inflation may slow down further in the months ahead. Freddie Mac Chief Economist, Sam Khater says, “As inflation continues to decelerate, economic growth is slowing and the tightening cycle of monetary policy is reaching its apex, which means mortgage rates are expected to decrease later this year and into next.”

As I have mentioned before, a large portion of sales reported this past May were all cash buyers, in fact 60 percent of transactions in Manhattan, to be precise. So while lower interest rates may not impact some prospective buyers, those who have been holding out can expect some good news on the far horizon. And regardless of where you fall in purchasing/financing your home, I think we can all agree that the easing of inflation is most welcomed news.

Comments


bottom of page